House prices are today lower than they were 12 months ago for the first time since 1996.

New figures show homes are worth, on average, one per cent less than they were in April 2007.

And it is feared the housing market slowdown could get worse because the number of mortgages available has been drastically reduced in the wake of the credit crunch crisis. Research by the Nationwide Building Society shows average house prices fell for the sixth month in a row in April, going down 1.1 per cent.

The average home in the UK now costs £178,555 - £1,759 less than 12 months ago.

It follows 133 consecutive months of increases since March 1996.

Liberal Democrat spokesman Vince Cable said: "It is clear that the bubble in the housing market has burst.

"With prices falling rapidly, the Government's hope that house prices would merely see a gentle correction now seem extremely optimistic." David Blanchflower, a member of the Bank of England's Monetary Policy Committee predicted house prices could fall by a third over the next few years if interest rates were not cut.

Economist Ed Stansfield added: "We have long warned that the housing market boom would end with a major correction and that correction now seems to be unfolding."

He predicted a 20 per cent fall by the end of 2009.

But others urged home owners to put this month's fall in to perspective - and pointed out homes are still worth considerable more than they were in 2006. Peter Bolton King, of the National Association of Estate Agents, said: "We have been experiencing huge price leaps of double percentage points in the housing market in recent years so overall a one per cent drop is a tiny proportion of the rise."

The new figures come the day after the Bank of England said the number of mortgages approved for house purchase fell to a record low in March.

Just 64,000 home loans were approved during the month, 44 percent below March 2007's level.

Are property prices heading for slump?

YES

Says Ed Stansfield of Capital Economics

Today's data are consistent with other evidence that the housing market correction is gathering momentum.

With confidence faltering, the economy now slowing and no sign that the tightening in lending criteria is coming to an end, it is hard to see what will prevent further house price falls.

The last time house prices declined over a 12-month period was March 1996, during the final throes of the early-1990s correction.

We have long warned that the housing market boom would end with a major correction - which now seems to be unfolding.

Since peaking last October, the Nationwide measure of house prices has fallen by a cumulative 4.2 per cent.

A quarter of the 20 per cent decline we are forecasting by the end of 2009 has already been delivered. And, as we have stressed, there is no guarantee that prices won't fall further in 2010.

NO

Says Rosalind Renshaw property market expert

Whenever house price falls are reported, it is as gloom and doom.

But the reality is first-time buyers and those wanting to move up the housing ladder need prices to drop.

Although first-time buyers capture the headlines, it is second-timers who are caught in an even worse trap: mortgaged to the hilt in a cramped one-bed apartment, many couples are unable to find the extra £50,000 typically needed for an extra bedroom.

Most people associate falling prices with negative equity, but a one per cent annual fall does not signal a return to the bad old days of the early 1990s.

The reason so many estate agents are shutting up shop is not because of falling values, but plummeting transaction levels - 40-50 per cent down year on year. If prices were more affordable, transactions would pick up.

A small, steady fall in house prices has many more winners than losers.